Inside the Star

EU wants 40 per cent quota for women on company boards

Companies may be required to favour women over equally qualified men for supervisory board seats, as they strive to meet a 40 per cent female directors quota the European Union set out in draft rules published today.

Companies may be required to favour women over equally qualified men for supervisory board seats, as they strive to meet a 40 per cent female directors quota the European Union set out in draft rules published today.

The European Commission adopted a proposal aiming to reach the 40 per cent level by 2020, Mina Andreeva, a spokeswoman for EU Justice Commissioner Viviane Reding, said in an emailed statement. Regulators amended earlier proposals so that companies would only face sanctions if they fail to favour women, even if they don’t manage to meet the quota.

Some 13.7 per cent of corporate board seats in the EU are held by women, following a 1.9 per cent increase between October 2010 and January 2012, the commission said in a report in March. The lack of female candidates for a seat on the European Central Bank’s Executive Board saw European Parliament lawmakers oppose the appointment of Luxembourg’s Yves Mersch.

The measures would apply to some 5,000 listed companies in the EU by 2020 and state-owned companies by 2018, the commission said. It would exclude companies with less than 250 employees or global sales below 50 million euros ($64 million.)

The draft rules need the backing of most of the EU’s 27 member states and the parliament, which can amend draft laws before they become final.

Director Positions

The amended proposals can, if governments wish, exempt listed companies from meeting the quota if women make up less than 10 per cent of their employees or if women hold at least one-third of all director positions.

Companies would also be required to disclose their reasons for selecting board members to unsuccessful candidates. The rules wouldn’t stop companies selecting a male candidate if an objective assessment made him preferable to an equally qualified women.

Reding’s initial plan was altered after failing to win the support of EU commissioners. The EU’s legal adviser warned that a stand-alone binding quota for women on boards may be not be “legally possible,” according to the notes of an Oct. 23 meeting where the rules were discussed.

While EU rules can’t mandate companies to reach a target, they can require companies to make efforts toward a target, said a person familiar with the talks last month.